Attached files
file | filename |
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EX-31.2 - EX-31.2 - CERES TACTICAL SYSTEMATIC L.P. | y04771exv31w2.htm |
EX-32.1 - EX-32.1 - CERES TACTICAL SYSTEMATIC L.P. | y04771exv32w1.htm |
EX-32.2 - EX-32.2 - CERES TACTICAL SYSTEMATIC L.P. | y04771exv32w2.htm |
EX-31.1 - EX-31.1 - CERES TACTICAL SYSTEMATIC L.P. | y04771exv31w1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-50718
TACTICAL DIVERSIFIED FUTURES FUND L.P.
New York | 13-4224248 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
c/o Ceres Managed Futures LLC
522 Fifth Avenue 14th Floor
New York, New York 10036
(Address of principal executive offices) (Zip Code)
522 Fifth Avenue 14th Floor
New York, New York 10036
(212) 296-1999
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes
X No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of the chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
|
Accelerated filer | Non-accelerated filer X | Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes No X
As of
April 30, 2011, 632,180.3112 Limited Partnership Redeemable Units were outstanding.
TACTICAL DIVERSIFIED FUTURES FUND L.P.
FORM 10-Q
INDEX
31.1 Certification
31.2 Certification
32.1 Certification
32.2 Certification
2
PART I
Item 1. Financial Statements
Tactical Diversified Futures Fund L.P.
Statements of Financial Condition
(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets: |
||||||||
Investment
in Funds, at fair value |
$ | 726,410,752 | $ | 734,276,743 | ||||
Equity in trading account: |
||||||||
Cash |
37,798,652 | 37,455,804 | ||||||
Cash margin |
4,454,599 | 5,998,581 | ||||||
Net unrealized appreciation on open futures contracts |
2,363,383 | 2,720,921 | ||||||
771,027,386 | 780,452,049 | |||||||
Interest receivable |
1,841 | 2,913 | ||||||
Total assets |
$ | 771,029,227 | $ | 780,454,962 | ||||
Liabilities and Partners Capital: |
||||||||
Liabilities: |
||||||||
Accrued expenses: |
||||||||
Brokerage fees |
$ | 3,533,885 | $ | 3,577,085 | ||||
Management fees |
1,226,584 | 1,249,495 | ||||||
Incentive fees |
347,609 | 364,790 | ||||||
Other |
313,551 | 158,419 | ||||||
Redemptions payable |
15,615,919 | 11,937,684 | ||||||
Total liabilities |
21,037,548 | 17,287,473 | ||||||
Partners Capital: |
||||||||
General Partner, 7,513.5294 unit equivalents
outstanding at March 31, 2011 and December 31,
2010 |
8,768,815 | 8,755,366 | ||||||
Limited
Partners, 635,115.8509 and 647,408.8339 Redeemable Units outstanding
at March 31, 2011 and December 31, 2010, respectively |
741,222,864 | 754,412,123 | ||||||
Total partners capital |
749,991,679 | 763,167,489 | ||||||
Total liabilities and partners capital |
$ | 771,029,227 | $ | 780,454,962 | ||||
Net asset
value per unit |
$ | 1,167.07 | $ | 1,165.28 | ||||
See accompanying notes to financial statements.
3
Tactical Diversified Futures Fund, L.P.
Condensed Schedule of Investments
March 31, 2011
(Unaudited)
Number of | % of Partners | |||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased |
||||||||||||
Currencies |
124 | $ | 326,306 | 0.04 | % | |||||||
Energy |
149 | 347,700 | 0.05 | |||||||||
Grains |
23 | (23,750 | ) | (0.00 | )* | |||||||
Interest Rates U.S. |
121 | (79,856 | ) | (0.01 | ) | |||||||
Interest Rates Non U.S. |
10 | (60,611 | ) | (0.01 | ) | |||||||
Metals |
136 | 1,225,740 | 0.16 | |||||||||
Softs |
220 | 1,316,255 | 0.18 | |||||||||
Total futures contracts purchased |
3,051,784 | 0.41 | ||||||||||
Futures Contracts Sold |
||||||||||||
Currencies |
29 | (4,638 | ) | (0.00 | )* | |||||||
Grains |
92 | (289,900 | ) | (0.04 | ) | |||||||
Indices |
28 | (393,468 | ) | (0.05 | ) | |||||||
Interest Rates Non U.S. |
141 | 35,187 | 0.00 | * | ||||||||
Softs |
31 | (35,582 | ) | (0.00 | )* | |||||||
Total futures contracts sold |
(688,401 | ) | (0.09 | ) | ||||||||
Investment in Funds |
||||||||||||
CMF Drury Capital Master Fund L.P. |
126,010,289 | 16.80 | ||||||||||
CMF Willowbridge Argo Master Fund L.P. |
31,393,472 | 4.19 | ||||||||||
CMF Aspect Master Fund L.P. |
125,499,291 | 16.73 | ||||||||||
CMF Capital Fund Management Master Fund L.P. |
126,177,743 | 16.82 | ||||||||||
CMF Winton Master L.P. |
102,895,106 | 13.72 | ||||||||||
CMF Graham Capital Master Fund L.P. |
100,734,517 | 13.43 | ||||||||||
CMF SandRidge Master Fund L.P. |
39,114,735 | 5.22 | ||||||||||
CMF Sasco Master Fund L.P. |
74,585,599 | 9.94 | ||||||||||
Total investment in Funds |
726,410,752 | 96.85 | ||||||||||
Net fair value |
$ | 728,774,135 | 97.17 | % | ||||||||
* | Due to rounding. |
See accompanying notes to financial statements.
4
Tactical Diversified Futures Fund L.P.
Condensed Schedule of Investments
December 31, 2010
Condensed Schedule of Investments
December 31, 2010
Number of |
% of Partners |
|||||||||||
Contracts | Fair Value | Capital | ||||||||||
Futures Contracts Purchased
|
||||||||||||
Currencies
|
208 | $ | 386,550 | 0.05 | % | |||||||
Energy
|
132 | 225,694 | 0.03 | |||||||||
Grains
|
246 | 338,625 | 0.04 | |||||||||
Indices
|
40 | 34,240 | 0.01 | |||||||||
Interest Rates Non U.S.
|
23 | 2,689 | 0.00 | * | ||||||||
Metals
|
148 | 1,301,880 | 0.17 | |||||||||
Softs
|
372 | 379,951 | 0.05 | |||||||||
Total futures contracts purchased
|
2,669,629 | 0.35 | ||||||||||
Futures Contracts Sold
|
||||||||||||
Currencies
|
28 | (25,275 | ) | (0.00 | )* | |||||||
Energy
|
1 | (1,250 | ) | (0.00 | )* | |||||||
Interest Rates U.S.
|
197 | 198,088 | 0.03 | |||||||||
Interest Rates Non U.S.
|
143 | (120,271 | ) | (0.02 | ) | |||||||
Total futures contracts sold
|
51,292 | 0.01 | ||||||||||
Investment in Funds
|
||||||||||||
CMF Drury Capital Master Fund L.P.
|
107,683,407 | 14.11 | ||||||||||
CMF Willowbridge Argo Master Fund L.P.
|
45,858,815 | 6.01 | ||||||||||
CMF Aspect Master Fund L.P.
|
108,551,664 | 14.22 | ||||||||||
CMF Capital Fund Management Master Fund L.P.
|
124,459,170 | 16.31 | ||||||||||
CMF Winton Master L.P.
|
123,917,915 | 16.24 | ||||||||||
CMF Graham Capital Master Fund L.P.
|
105,484,588 | 13.82 | ||||||||||
CMF SandRidge Master Fund L.P.
|
73,181,625 | 9.59 | ||||||||||
CMF Sasco Master Fund L.P.
|
45,139,559 | 5.91 | ||||||||||
Total investment in Funds
|
734,276,743 | 96.21 | ||||||||||
Net fair value
|
$ | 736,997,664 | 96.57 | % | ||||||||
* | Due to rounding. |
See accompanying notes to financial statements.
5
Tactical Diversified Futures Fund L.P.
Statements of Income and Expenses and Changes in Partners Capital
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Investment Income: |
||||||||
Interest income |
$ | 8,888 | $ | 4,142 | ||||
Interest income from investment in Funds |
141,100 | 90,484 | ||||||
Total investment income |
149,988 | 94,626 | ||||||
Expenses: |
||||||||
Brokerage fees including clearing fees |
11,499,754 | 11,510,886 | ||||||
Management fees |
3,735,852 | 3,783,871 | ||||||
Incentive fees |
347,609 | | ||||||
Other |
526,043 | 246,738 | ||||||
Total expenses |
16,109,258 | 15,541,495 | ||||||
Net investment income (loss) |
(15,959,270 | ) | (15,446,869 | ) | ||||
Trading Results: |
||||||||
Net gains (losses) on trading of commodity interests and investment in Funds: |
||||||||
Net realized gains (losses) on closed contracts |
2,984,477 | (2,678,901 | ) | |||||
Net realized gains (losses) on investment in Funds |
22,634,584 | (3,461,156 | ) | |||||
Change in net unrealized gains (losses) on open contracts |
(357,538 | ) | 1,270,447 | |||||
Change in net unrealized gains (losses) on investment in Funds |
(8,060,004 | ) | 5,268,920 | |||||
Total trading results |
17,201,519 | 399,310 | ||||||
Net income (loss) |
1,242,249 | (15,047,559 | ) | |||||
Subscriptions Limited Partners |
19,941,239 | 35,779,000 | ||||||
Redemptions Limited Partners |
(34,359,298 | ) | (23,359,112 | ) | ||||
Net increase (decrease) in Partners Capital |
(13,175,810 | ) | (2,627,671 | ) | ||||
Partners Capital, beginning of period |
763,167,489 | 789,539,282 | ||||||
Partners Capital, end of period |
$ | 749,991,679 | $ | 786,911,611 | ||||
Net asset value per unit (642,629.3803 and 661,382.0842 units outstanding in March 31, 2011 and 2010, respectively) |
$ | 1,167.07 | $ | 1,189.80 | ||||
Net income (loss) per unit* |
$ | 1.79 | $ | (22.91 | ) | |||
Weighted average units outstanding |
657,992.0238 | 665,243.4737 | ||||||
* | Based on change in net asset value per unit. |
See accompanying notes to financial statements.
6
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
1. | General: |
Tactical Diversified Futures Fund L.P. (the Partnership) is a limited partnership
organized under the partnership laws of the State of New York on December 3, 2002 to engage, directly or
indirectly, in the speculative trading of a diversified portfolio of commodity interests including
futures contracts, options, swaps and forward contracts. The sectors traded include currencies,
energy, grains, indices, U.S. and non-U.S. interest rates, livestock, lumber, metals and softs. The
commodity interests that are traded by the Partnership and the Funds
(as defined in Note 5 Investment in Funds) are volatile and involve a high degree of
market risk.
Between March 27, 2003 (commencement of the public offering period) and April 30, 2003, 36,616
redeemable units of limited partnership interest (Redeemable Units) were publicly offered at
$1,000 per Redeemable Unit. The proceeds of the initial public offering were held in an escrow
account until April 30, 2003, at which time they were turned over to the Partnership for trading.
The Partnership was authorized to publicly offer 300,000 Redeemable Units during the initial public
offering period. As of December 4, 2003, the Partnership was authorized to publicly offer an
additional 700,000 Redeemable Units. As of October 7, 2004, the Partnership was authorized to
publicly offer an additional 1,000,000 Redeemable Units. As of June 30, 2005, the Partnership was
authorized to publicly offer the 2,000,000 Redeemable Units previously registered. The public
offering of Redeemable Units terminated on November 30, 2008. The Partnership currently privately
and continuously offers up to 200,000 Redeemable Units to qualified investors. There is no maximum
number of Redeemable Units that may be sold by the Partnership.
Ceres Managed Futures LLC, a Delaware limited liability company, acts as the general partner
(the General Partner) and commodity pool operator of the Partnership. The General Partner is
wholly owned by Morgan Stanley Smith Barney Holdings LLC (MSSB
Holdings). Morgan Stanley, indirectly through various subsidiaries, owns a
majority equity interest in MSSB Holdings. Citigroup
Global Markets Inc. (CGM), the commodity broker and a selling agent for the Partnership, owns a
minority equity interest in MSSB Holdings. Citigroup Inc. (Citigroup), indirectly through various subsidiaries, wholly
owns CGM. Prior to July 31, 2009, the date as of which MSSB Holdings became its owner, the General
Partner was wholly owned by Citigroup Financial Products Inc., a wholly owned subsidiary of
Citigroup Global Markets Holdings Inc., the sole owner of which is
Citigroup.
As
of March 31, 2011, all trading decisions are made for the Partnership by Drury Capital,
Inc., (Drury), Graham Capital Management, L.P., (Graham), John W. Henry & Company, Inc.,
(JWH), Willowbridge Associates Inc. (Willowbridge), Aspect Capital Limited (Aspect), Capital
Fund Management S.A. (CFM), Winton Capital Management Limited (Winton), SandRidge Capital
L.P. (SandRidge) and Sasco Energy Partners LLC
(Sasco) (each an Advisor and collectively, the Advisors), each of which is a
registered commodity trading advisor. AAA Capital Management Advisors, Ltd. (AAA) was terminated
as of January 31, 2010. Each Advisor is allocated a portion of the Partnerships assets to manage.
The Partnership invests the portion of its assets allocated to JWH directly, where as the
Partnership invests the portion of its assets allocated to each of the other Advisors indirectly
through investments in master funds.
The General Partner and each limited partner share in the profits and losses of the
Partnership in proportion to the amount of Partnership interest owned by each except that no
limited partner shall be liable for obligations of the Partnership in excess of its capital contribution and profits, if any, net of distributions.
The accompanying financial statements are unaudited but, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of
the Partnerships financial condition at March 31, 2011 and
December 31, 2010, and the results of
its operations and changes in partners capital for the three
months ended March 31, 2011 and 2010. These financial statements present the results of interim periods and do not include all
disclosures normally provided in annual financial statements. You should read these financial
statements together with the financial statements and notes included in the Partnerships annual
report on Form 10-K filed with the Securities and Exchange Commission (the SEC) for the year
ended December 31, 2010.
The preparation of financial statements and accompanying notes in conformity with
accounting principles
generally accepted in the United States of America (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, income and expenses, and
related disclosures of contingent assets and liabilities in the financial statements and
accompanying notes. As a result, actual results could
differ from these estimates.
7
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Due to the nature of commodity trading, the results of operations for the interim periods
presented should not be considered indicative of the results that may be expected for the entire
year.
2. | Financial Highlights: |
Changes in the net asset value per unit for the
three months ended March 31, 2011 and 2010 were as follows:
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net realized and unrealized gains (losses) * |
$ | 8.55 | $ | (16.99 | ) | |||
Interest income |
0.23 | 0.14 | ||||||
Expenses ** |
(6.99 | ) | (6.06 | ) | ||||
Increase (decrease) for the period |
1.79 | (22.91 | ) | |||||
Net asset value per unit, beginning of period |
1,165.28 | 1,212.71 | ||||||
Net asset value per unit, end of period |
$ | 1,167.07 | $ | 1,189.80 | ||||
* | Includes brokerage fees. | |
** | Excludes brokerage fees. |
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Ratios to average net assets:*** |
||||||||
Net investment income (loss)
before incentive fees**** |
(8.3 | )% | (8.1 | )% | ||||
Operating expenses |
8.4 | % | 8.1 | % | ||||
Incentive fees |
0.0 | %***** | | % | ||||
Total expenses |
8.4 | % | 8.1 | % | ||||
Total return: |
||||||||
Total return before incentive fees |
0.2 | % | (1.9 | )% | ||||
Incentive fees |
(0.0 | )%***** | | % | ||||
Total return after incentive fees |
0.2 | % | (1.9 | )% | ||||
*** | Annualized (other than incentive fees). | |
**** | Interest income less total expenses. | |
***** | Due to rounding. |
The above ratios may vary for individual investors based on the timing of capital transactions
during the period. Additionally, these ratios are calculated for the limited partner class using
the limited partners share of income, expenses and average net assets.
8
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
3. | Trading Activities: |
The Partnership was formed for the purpose of trading contracts in a variety of commodity
interests, including derivative financial instruments and derivative commodity instruments. The
results of the Partnerships trading activities are shown in the Statements of Income and Expenses
and Changes in Partners Capital.
The
customer agreements between the Partnership and CGM and the Funds and
CGM give the Partnership and the Funds the legal right
to net unrealized gains and losses on open futures contracts and open
forward contracts. The
Partnership and the Funds net, for financial
reporting purposes, the unrealized gains and losses on open futures and open
forward contracts on the Statements of
Financial Condition.
All of the commodity interests owned by the Partnership are held for trading purposes.
All of the commodity interests owned by the Funds are held for
trading purposes. The monthly average number of futures contracts traded
directly by the Partnership during the three months ended March 31, 2011
and 2010 were 1,298 and 1,291, respectively.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance,
subscriptions and redemptions.
The
following tables indicate the gross fair values of derivative
instruments of futures contracts traded directly by the Partnership
as separate assets and liabilities as of March 31, 2011 and December
31, 2010.
March 31, 2011 | ||||
Assets |
||||
Currencies |
$ | 334,650 | ||
Energy |
357,790 | |||
Interest Rates Non U.S. |
36,357 | |||
Metals |
1,225,740 | |||
Softs |
1,316,255 | |||
Total unrealized appreciation on open futures contracts |
$ | 3,270,792 | ||
Liabilities |
||||
Currencies |
$ | (12,982 | ) | |
Energy |
(10,090 | ) | ||
Grains |
(313,650 | ) | ||
Indices |
(393,468 | ) | ||
Interest Rates U.S. |
(79,856 | ) | ||
Interest Rates Non U.S. |
(61,781 | ) | ||
Softs |
(35,582 | ) | ||
Total unrealized depreciation on open futures contracts |
$ | (907,409 | ) | |
Net unrealized appreciation on open futures contracts |
$ | 2,363,383 | * | |
* | This amount is in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. |
9
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
December 31, 2010 | ||||
Assets
|
||||
Futures Contracts
|
||||
Currencies
|
$ | 386,550 | ||
Energy
|
225,694 | |||
Grains
|
338,625 | |||
Indices
|
34,240 | |||
Interest Rates U.S.
|
211,500 | |||
Interest Rates Non U.S.
|
94,003 | |||
Metals
|
1,301,880 | |||
Softs
|
597,238 | |||
Total unrealized appreciation on open futures contracts
|
$ | 3,189,730 | ||
Liabilities
|
||||
Futures Contracts
|
||||
Currencies
|
$ | (25,275 | ) | |
Energy
|
(1,250 | ) | ||
Interest Rates U.S.
|
(13,412 | ) | ||
Interest Rates Non U.S.
|
(211,585 | ) | ||
Softs
|
(217,287 | ) | ||
Total unrealized depreciation on open futures contracts
|
$ | (468,809 | ) | |
Net unrealized appreciation on open futures contracts
|
$ | 2,720,921 | ** | |
** | This amount is in Net unrealized appreciation on open futures contracts on the Statements of Financial Condition. |
The following table indicates the trading gains and losses, by market sector, on derivative
instruments traded directly by the Partnership for the three months ended March 31, 2011 and 2010.
Three Months Ended | Three Months Ended | |||||||
March 31, 2011 | March 31, 2010 | |||||||
Sector | Total trading results | Total trading results | ||||||
Currencies |
$ | (758,310 | ) | $ | 452,840 | |||
Energy |
2,584,280 | (545,048 | ) | |||||
Grains |
(843,275 | ) | 17,275 | |||||
Indices |
(581,507 | ) | (73,736 | ) | ||||
Interest Rates U.S. |
(120,251 | ) | (189,962 | ) | ||||
Interest Rates Non U.S. |
(99,934 | ) | 71,165 | |||||
Metals |
602,885 | (1,664,160 | ) | |||||
Softs |
1,843,051 | 523,172 | ||||||
Total |
$ | 2,626,939 | *** | $ | (1,408,454) | *** | ||
*** | This amount is in Total trading results on the Statements of Income and Expenses and Changes in Partners Capital. |
10
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
4. | Fair Value Measurements: |
Partnerships and the Funds Investments. All commodity interests (including derivative
financial instruments and derivative commodity instruments) are held for trading purposes. The
commodity interests are recorded on trade date and open contracts are recorded at fair value (as
described below) at the measurement date. Investments in commodity interests denominated in foreign
currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement
date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on
open contracts are included as a component of equity in trading account on the Statements of
Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from
the preceding period are reported in the Statements of Income and Expenses and Changes in Partners
Capital.
Partnerships
and the Funds Fair Value Measurements. Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date under current market conditions. The fair value hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to fair values derived from unobservable inputs
(Level 3). The level in the fair value hierarchy within which the fair value measurement in its
entirety falls shall be determined based on the lowest level input that is significant to the fair
value measurement in its entirety. Management has concluded that based on available information in the marketplace,
the Partnerships and the Funds Level 1 assets and liabilities are actively traded.
GAAP also requires the need to use judgment in determining if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has concluded that based on available information in the marketplace, there has not been a significant decrease in the
volume and level of activity in the Partnerships and the Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances, and
settlements in its reconciliation of Level 3 fair value measurements
(i.e., to present such items
on a gross basis rather than on a net basis), and make disclosures regarding the level of
disaggregation and the inputs and valuation techniques used to measure fair value for measurements
that fall within either Level 2 or Level 3 of the fair value hierarchy as required under GAAP.
The Partnership and the Funds consider prices for exchange-traded commodity futures, forwards
and options contracts to be based on unadjusted quoted prices in active markets for identical
assets (Level 1). The values of non exchange-traded forwards, swaps and certain options contracts
for which market quotations are not readily available are priced by broker-dealers who derive fair
values for those assets from observable inputs (Level 2). Investments
in funds (other
commodity pools) where there are no other rights or obligations inherent within the ownership
interest held by the Partnership are priced based on the end of the day net asset value (Level 2).
The value of the Partnerships investments in the Funds reflects its proportional interest in
the Funds. As of and for the periods ended March 31, 2011 and
December 31, 2010, the
Partnership and the Funds did not hold any derivative instruments that are priced at fair value
using unobservable inputs through the application of managements assumptions and internal
valuation pricing models (Level 3).
Quoted Prices in | ||||||||||||||||
Active Markets for Identical |
Significant Other Observable Inputs |
Significant Unobservable |
||||||||||||||
3/31/11 | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Futures |
$ | 3,270,792 | $ | 3,270,792 | $ | | $ | | ||||||||
Investment in Funds |
726,410,752 | | 726,410,752 | | ||||||||||||
Total assets |
729,681,544 | 3,270,792 | 726,410,752 | | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
$ | 907,409 | $ | 907,409 | $ | | $ | | ||||||||
Total liabilites |
907,409 | 907,409 | | | ||||||||||||
Net fair value |
$ | 728,774,135 | $ | 2,363,383 | $ | 726,410,752 | $ | | ||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for Identical |
Significant Other Observable Inputs |
Significant Unobservable |
||||||||||||||
12/31/2010* | Assets (Level 1) | (Level 2) | Inputs (Level 3) | |||||||||||||
Assets |
||||||||||||||||
Futures |
$ | 3,189,730 | $ | 3,189,730 | $ | | $ | | ||||||||
Investment in Funds |
734,276,743 | | 734,276,743 | | ||||||||||||
Total assets |
737,466,473 | 3,189,730 | 734,276,743 | | ||||||||||||
Liabilities |
||||||||||||||||
Futures |
$ | 468,809 | $ | 468,809 | $ | | $ | | ||||||||
Total liabilites |
468,809 | 468,809 | | | ||||||||||||
Net fair value |
$ | 736,997,664 | $ | 2,720,921 | $ | 734,276,743 | $ | | ||||||||
* The amounts have been reclassified from the December 31, 2010
prior year financial statements to conform to current year presentation based on new fair value guidance.
11
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
5. | Investment in Funds: |
The assets allocated to JWH for trading are invested directly pursuant to JWHs Global
Analytics Program.
On December 1, 2004, the assets allocated to Winton for trading were invested in the CMF
Winton Master L.P. (Winton Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 52,981.2908 units of
Winton Master with cash equal to
$57,471,493. Winton Master was formed in order to permit accounts managed now or in the future by
Winton using the Diversified Program, a proprietary, systematic trading system, to invest together
in one trading vehicle. The General Partner is also the general partner of Winton Master.
Individual and pooled accounts currently managed by Winton, including
the Partnership, are permitted
to be limited partners of Winton Master. The General Partner and Winton believe that trading
through this structure should promote efficiency and economy in the trading process.
On March 1, 2005, the assets allocated to Aspect for trading were invested in the CMF Aspect
Master Fund L.P. (Aspect Master), a limited partnership organized under the partnership laws of
the State of New York. The Partnership purchased 131,340.8450 units of Aspect Master with cash equal to
$122,786,448 and a contribution of open commodity futures and forward contracts with a fair value
of $8,554,397. Aspect Master was formed in order to permit accounts managed now or in the future by
Aspect using the Diversified Program, a proprietary, systematic trading system, to invest together
in one trading vehicle. The General Partner is also the general partner of Aspect Master.
Individual and pooled accounts currently managed by Aspect, including
the Partnership, are permitted
to be limited partners of Aspect Master. The General Partner and Aspect believe that trading
through this structure should promote efficiency and economy in the trading process.
On July 1, 2005, the assets allocated to Willowbridge for trading were invested in the CMF
Willowbridge Argo Master Fund L.P. (Willowbridge Master), a limited partnership organized under
the partnership laws of the State of New York. The Partnership purchased 95,795.8082 units of
Willowbridge Master with cash equal to $85,442,868 and a contribution of open commodity futures and forward
contracts with a fair value of $10,352,940. Willowbridge Master was formed in order to permit
accounts managed now or in the future by Willowbridge using the Argo Trading System, a proprietary,
systematic trading system, to invest together in one trading vehicle. The General Partner is also
the general partner of Willowbridge Master. Individual and pooled accounts currently managed by
Willowbridge, including the Partnership, are permitted to be limited partners of Willowbridge
Master. The General Partner and Willowbridge believe that trading through this structure should
promote efficiency and economy in the trading process.
On August 1, 2005, the assets allocated to Drury for trading were invested in the CMF Drury
Capital Master Fund L.P. (Drury Master), a limited partnership organized under the partnership
laws of the State of New York. The Partnership purchased 120,720.7387 units of Drury Master with
cash equal to $117,943,206 and a contribution of open commodity futures and forward contracts with a fair value of
$2,777,533. Drury Master was formed in order to permit accounts managed now or in the future by
Drury using the Diversified Trend-Following Program, a proprietary, systematic trading system, to
invest together in one trading vehicle. The General Partner is also the general partner of Drury
Master. Individual and pooled accounts currently managed by Drury, including the Partnership, are
permitted to be limited partners of Drury Master. The General Partner and Drury believe that
trading through this structure should promote efficiency and economy in the trading process.
On August 1, 2005, the assets allocated to CFM for trading were invested in the CMF Capital
Fund Management Master Fund L.P. (CFM Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership purchased 159,434.0631 units of CFM
Master with cash equal to $157,804,020 and a contribution of open commodity futures and forward contracts with a
fair value of $1,630,043. CFM Master was formed in order to permit accounts managed now or in the
future by CFM using the Discus Program, a proprietary, systematic trading system, to invest
together in one trading vehicle. The General Partner is also the general partner of CFM Master.
Individual and pooled accounts currently managed by CFM, including
the Partnership, are permitted to
be limited partners of CFM Master. The General Partner and CFM believe that trading through this
structure should promote efficiency and economy in the trading process.
12
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
On October 1, 2005, the assets allocated to AAA for trading were invested in the AAA Master
Fund LLC (AAA Master) a limited liability company organized under the New York Limited Liability Company
Law. The Partnership purchased 13,956.1190 units of AAA Master with cash
equal to $50,000,000. AAA Master was formed in order to permit accounts managed now or in the future by
AAA using the Energy Program Futures and Swaps, a proprietary, discretionary trading system, to
invest in one trading vehicle. The Partnership fully redeemed its investment in AAA Master on
January 31, 2010 for cash equal to $40,267,084.
On June 1, 2006, the assets allocated to Graham for trading were invested in the CMF Graham
Capital Master Fund L.P. (Graham Master), a limited partnership organized under the partnership
laws of the State of New York. The Partnership purchased 101,486.0491 units of Graham Master with
cash equal to $103,008,482. Graham Master was formed in order to permit accounts managed now or in the
future by Graham using the K4D-15V program, a proprietary, systematic
trading program, to invest
together in one trading vehicle. The General Partner is also the general partner of Graham Master.
Individual and pooled accounts currently managed by Graham, including the Partnership, are
permitted to be limited partners of Graham Master. The General Partner and Graham believe that
trading through this structure should promote efficiency and economy in the trading process.
On March 1, 2009, the assets allocated to SandRidge for trading were in invested in the CMF
SandRidge Master Fund L.P. (SandRidge Master), a limited partnership organized under the
partnership laws of the State of New York. The Partnership purchased 14,408.1177 units of SandRidge
Master with cash equal to $27,000,000. SandRidge Master was formed in order to permit commodity pools
managed now or in the future by SandRidge using the Energy Program, a proprietary,
discretionary trading system, to invest together in one trading vehicle. The General Partner is
also the general partner of SandRidge Master. Individual and pooled accounts currently managed by
SandRidge, including the Partnership, are permitted to be limited partners of SandRidge Master. The
General Partner and SandRidge believe that trading through this structure should promote efficiency
and economy in the trading process.
On October 1, 2010, the assets allocated to Sasco for trading were invested in the CMF
Sasco Master Fund L.P. (Sasco Master), a limited partnership organized under the partnership laws
of the State of New York. The Partnership purchased 19,612.3882 units of Sasco Master with cash
equal to $25,535,000. Sasco Master was formed in order to permit commodity pools managed now or in
the future by Sasco using the Energy Program, a proprietary, discretionary trading system, to
invest together in one trading vehicle. The General Partner is also the general partner of Sasco Master. Individual
and pooled accounts currently managed by Sasco, including the Partnership, are permitted to be
limited partners of Sasco Master. The General Partner and Sasco believe that trading through this
structure should promote efficiency and economy in the trading process.
The General Partner is not aware of any material changes to the trading programs discussed
above during the fiscal quarter ended March 31, 2011.
Winton Masters, Aspect Masters,
Drury Masters, Willowbridge Masters, CFM Masters, Graham
Masters, SandRidge Masters and Sasco Masters (collectively, the Funds) and the Partnerships trading of
futures and exchange cleared swaps, forwards and options contracts, if applicable, on commodities
is done primarily on U.S. commodity exchanges and foreign commodity exchanges.
The Funds and the Partnership engage in such trading through commodity brokerage accounts
maintained with CGM.
A limited partner may withdraw all or part of their capital contribution
and undistributed profits, if any, from the Funds in multiples of the net asset value per
unit as of the end of any day (the Redemption Date)
after a request for redemption has been made to the General Partner at least 3 days
in advance of the Redemption Date. The units are classified as a liability when the limited
partner elects to redeem and informs the Funds.
Management and incentive fees
are charged at the Partnership level. All exchange, clearing,
user, give-up, floor brokerage and National Futures Association fees (collectively the clearing fees) are borne by the
Partnership directly and through its investment in the Funds. All other fees including CGMs direct
brokerage fees are charged at the Partnership level.
At
March 31, 2011, the Partnership owned approximately
89.0% of Drury Master, 18.6% of
Willowbridge Master, 73.0% of Aspect Master, 77.2% of CFM Master,
11.0% of Winton Master, 63.7% of
Graham Master, 10.3% of SandRidge Master
and 73.0% of Sasco Master. At December 31, 2010, the Partnership owned
approximately 87.5% of Drury Master, 21.2% of Willowbridge Master,
68.7% of Aspect Master, 76.3% of
CFM Master, 14.0% of Winton Master, 62.5% of Graham Master, 13.8% of
SandRidge Master and 55.3% of Sasco Master. It is the Partnerships intention to continue
to invest in the Funds. The performance of the Partnership is directly affected by the performance of the
Funds. Expenses to investors
as a result of investment in the Funds are approximately the same and the redemption rights are not
affected.
13
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Summarized
information reflecting the total assets, liabilities and capital for
the Funds is
shown in the following tables.
March 31, 2011 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Drury Master |
$ | 141,671,220 | $ | 54,890 | $ | 141,616,330 | ||||||
Willowbridge Master |
168,695,333 | 80,498 | 168,614,835 | |||||||||
Aspect Master |
171,917,989 | 60,063 | 171,857,926 | |||||||||
CFM Master |
163,901,892 | 538,601 | 163,363,291 | |||||||||
Winton Master |
938,976,048 | 889,625 | 938,086,423 | |||||||||
Graham Master |
158,542,504 | 335,674 | 158,206,830 | |||||||||
SandRidge Master |
417,397,881 | 39,202,100 | 378,195,781 | |||||||||
Sasco Master |
109,008,174 | 6,899,009 | 102,109,165 | |||||||||
Total |
$ | 2,270,111,041 | $ | 48,060,460 | $ | 2,222,050,581 | ||||||
December 31, 2010 | ||||||||||||
Total Assets | Total Liabilities | Total Capital | ||||||||||
Drury Master |
$ | 123,117,898 | $ | 43,219 | $ | 123,074,679 | ||||||
Willowbridge Master |
216,360,362 | 61,729 | 216,298,633 | |||||||||
Aspect Master |
157,910,582 | 46,523 | 157,864,059 | |||||||||
CFM Master |
163,136,901 | 63,667 | 163,073,234 | |||||||||
Winton Master |
883,842,483 | 122,612 | 883,719,871 | |||||||||
Graham Master |
168,973,503 | 48,832 | 168,924,671 | |||||||||
SandRidge Master |
581,631,311 | 52,896,054 | 528,735,257 | |||||||||
Sasco Master |
81,882,294 | 198,664 | 81,683,630 | |||||||||
Total |
$ | 2,376,855,334 | $ | 53,481,300 | $ | 2,323,374,034 | ||||||
Summarized information reflecting the net investment income (loss), total trading results and
net income (loss) for the Funds is shown in the following tables.
For the three months ended March 31, 2011 | ||||||||||||
Net Investment | Total Trading | |||||||||||
Income (Loss) | Results | Net Income (Loss) | ||||||||||
Drury Master |
$ | (48,989 | ) | $ | 3,976,188 | $ | 3,927,199 | |||||
Willowbridge Master |
(25,559 | ) | 6,874,935 | 6,849,376 | ||||||||
Aspect Master |
(28,839 | ) | 1,725,970 | 1,697,131 | ||||||||
CFM Master |
(391,973 | ) | 8,294,467 | 7,902,494 | ||||||||
Winton Master |
46,285 | 22,234,532 | 22,280,817 | |||||||||
Graham Master |
(146,256 | ) | (1,070,720 | ) | (1,216,976 | ) | ||||||
SandRidge Master |
(250,105 | ) | 15,043,073 | 14,792,968 | ||||||||
Sasco Master |
(369,953 | ) | (2,250,744 | ) | (2,620,697 | ) | ||||||
Total |
$ | (1,215,389 | ) | $ | 54,827,701 | $ | 53,612,312 | |||||
For the three months ended March 31, 2010 | ||||||||||||
Net Investment | Total Trading | |||||||||||
Income (Loss) | Results | Net Income (Loss) | ||||||||||
Drury Master |
$ | (39,551 | ) | $ | (265,746 | ) | $ | (305,297 | ) | |||
Willowbridge Master |
(67,599 | ) | (20,526,632 | ) | (20,594,231 | ) | ||||||
Aspect Master |
(47,890 | ) | 6,886,287 | 6,838,397 | ||||||||
CFM Master |
(602,334 | ) | 3,154,756 | 2,552,422 | ||||||||
Winton Master |
(96,434 | ) | 32,303,622 | 32,207,188 | ||||||||
AAA Master |
(1,020,434 | ) | (32,837,037 | ) | (33,857,471 | ) | ||||||
Graham Master |
(99,316 | ) | (3,943,186 | ) | (4,042,502 | ) | ||||||
SandRidge Master |
(261,244 | ) | (15,233,208 | ) | (15,494,452 | ) | ||||||
Total |
$ | (2,234,802 | ) | $ | (30,461,144 | ) | $ | (32,695,946 | ) | |||
14
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Summarized information reflecting the Partnerships investment in, and the operations of, the
Funds is shown in the following tables.
March 31, 2011 | For the three months ended March 31, 2011 | |||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||
Partnerships | Fair | Income | Income | Investment | Redemptions | |||||||||||||||||||||||
Funds | Net Assets | Value | (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||
Drury Master |
16.80 | % | $ | 126,010,289 | $ | 3,508,802 | $ | 48,922 | $ | 19,154 | $ | 3,440,726 | Commodity Portfolio | Monthly | ||||||||||||||
Willowbridge Master |
4.19 | % | 31,393,472 | 1,213,936 | 7,453 | 6,111 | 1,200,372 | Commodity Portfolio | Monthly | |||||||||||||||||||
Aspect Master |
16.73 | % | 125,499,291 | 1,280,542 | 26,520 | 16,544 | 1,237,478 | Commodity Portfolio | Monthly | |||||||||||||||||||
CFM Master |
16.82 | % | 126,177,743 | 6,390,066 | 298,350 | 27,591 | 6,064,125 | Commodity Portfolio | Monthly | |||||||||||||||||||
Winton Master |
13.72 | % | 102,895,106 | 2,567,330 | 14,656 | 3,676 | 2,548,998 | Commodity Portfolio | Monthly | |||||||||||||||||||
Graham Master |
13.43 | % | 100,734,517 | (670,023 | ) | 98,289 | 14,289 | (782,601 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Sandridge Master |
5.22 | % | 39,114,735 | 2,152,330 | 31,737 | 10,774 | 2,109,819 | Energy Portfolio | Monthly | |||||||||||||||||||
Sasco Master |
9.94 | % | 74,585,599 | (1,727,303 | ) | 234,412 | $ | 33,687 | (1,995,402 | ) | Energy Portfolio | Monthly | ||||||||||||||||
Total |
$ | 726,410,752 | $ | 14,715,680 | $ | 760,339 | $ | 131,826 | $ | 13,823,515 | ||||||||||||||||||
December 31, 2010 | For the three months ended March 31, 2010 | |||||||||||||||||||||||||||
% of | Expenses | Net | ||||||||||||||||||||||||||
Partnerships | Fair | Income | Income | Investment | Redemptions | |||||||||||||||||||||||
Funds | Net Assets | Value | (Loss) | Brokerage Fees | Other | (Loss) | Objective | Permitted | ||||||||||||||||||||
Drury Master |
14.11 | % | $ | 107,683,407 | $ | (207,597 | ) | $ | 33,727 | $ | 13,672 | $ | (254,996 | ) | Commodity Portfolio | Monthly | ||||||||||||
Willowbridge Master |
6.01 | % | 45,858,815 | (5,993,852 | ) | 23,144 | 5,507 | (6,022,503 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Aspect Master |
14.22 | % | 108,551,664 | 4,228,773 | 31,519 | 9,773 | 4,187,481 | Commodity Portfolio | Monthly | |||||||||||||||||||
CFM Master |
16.31 | % | 124,459,170 | 2,488,564 | 466,122 | 14,131 | 2,008,311 | Commodity Portfolio | Monthly | |||||||||||||||||||
Winton Master |
16.24 | % | 123,917,915 | 5,875,152 | 30,804 | 3,121 | 5,841,227 | Commodity Portfolio | Monthly | |||||||||||||||||||
AAA Master |
0.00 | % | | (134,982 | ) | 10,603 | 2,019 | (147,604 | ) | Energy Portfolio | Monthly | |||||||||||||||||
Graham Master |
13.82 | % | 105,484,588 | (1,604,650 | ) | 56,696 | 9,217 | (1,670,563 | ) | Commodity Portfolio | Monthly | |||||||||||||||||
Sandridge Master |
9.59 | % | 73,181,625 | (2,753,160 | ) | 46,860 | 12,507 | (2,812,527 | ) | Energy Portfolio | Monthly | |||||||||||||||||
Sasco Master |
5.91 | % | 45,139,559 | | | | | Energy Portfolio | Monthly | |||||||||||||||||||
Total |
$ | 734,276,743 | $ | 1,898,248 | $ | 699,475 | $ | 69,947 | $ | 1,128,826 | ||||||||||||||||||
15
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
6. | Financial Instrument Risks: |
In the normal course of business, the Partnership and the Funds are parties to financial
instruments with off-balance sheet risk, including derivative financial instruments and derivative
commodity instruments. These financial instruments may include forwards, futures, options and
swaps, whose values are based upon an underlying asset, index or reference rate, and generally
represent future commitments to exchange currencies or cash balances, to purchase or sell other
financial instruments on specific terms at specified future dates, or, in the case of derivative
commodity instruments, to have a reasonable possibility to be settled in cash, through physical
delivery or with another financial instrument. These instruments may be traded on an exchange or
over-the-counter (OTC). Exchange-traded instruments are standardized and include futures and
certain forwards and option contracts. OTC contracts are negotiated between contracting parties and
include forwards and certain options. Each of these instruments is subject to various risks similar
to those related to the underlying financial instruments, including market and credit risk. In
general, the risks associated with OTC contracts are greater than those associated with exchange-traded instruments because of the greater risk of default by the counterparty to an OTC contract.
The risk to the limited partners that have purchased interests in the Partnership is limited to the amount
of their capital contributions to the Partnership and their share of the Partnerships assets and undistributed
profits. This limited liability is a consequence of the organization of the Partnership as a limited
partnership under applicable law.
Market risk is the potential for changes in the value of the financial instruments traded by
the Partnership/Funds due to market changes, including interest and foreign exchange rate movements
and fluctuations in commodity or security prices. Market risk is directly impacted by the
volatility and liquidity in the markets in which the related underlying assets are traded. The
Partnership/Funds are exposed to a market risk equal to the value of futures and forward contracts
purchased and unlimited liability on such contracts sold short.
Credit risk is the possibility that a loss may occur due to the failure of a counterparty to
perform according to the terms of a contract. The Partnerships/Funds risk of loss in the event of
a counterparty default is typically limited to the amounts recognized in the Statements of
Financial Condition and is not represented by the contract or notional amounts of the instruments. The
Partnerships/Funds risk of loss is reduced through the use of legally enforceable master netting
agreements with counterparties that permit the Partnership/Funds to offset unrealized gains and
losses and other assets and liabilities with such counterparties upon the occurrence of certain
events. The Partnership/Funds have credit risk and concentration risk as the sole counterparty or
broker with respect to the Partnerships/Funds assets is CGM or a CGM affiliate. Credit risk with
respect to exchange-traded instruments is reduced to the extent that through CGM, the
Partnerships/Funds counterparty is an exchange or clearing organization.
As both a buyer and seller of options, the Funds pay or receive a premium at the outset and
then bear the risk of unfavorable changes in the price of the contract underlying the option.
Written options expose the Funds to potentially unlimited liability; for purchased options the risk
of loss is limited to the premiums paid. Certain written put options permit cash settlement and do
not require the option holder to own the reference asset. The Funds do not consider these contracts
to be guarantees.
The General Partner monitors and attempts to control the Partnerships/Funds risk exposure on
a daily basis through financial, credit and risk management monitoring systems, and accordingly,
believes that it has effective procedures for evaluating and limiting the credit and market risks
to which the Partnership/Funds may be subject. These monitoring systems generally allow the General
Partner to statistically analyze actual trading results with risk-adjusted performance indicators
and correlation statistics. In addition, online monitoring systems provide account analysis of
futures, forwards and options positions by sector, margin requirements, gain and loss transactions
and collateral positions.
The majority of these instruments mature within one year of the inception date. However, due
to the nature of the Partnerships/Funds businesses, these instruments may not be held to
maturity.
16
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
7. Critical Accounting Policies:
Use of Estimates. The preparation of financial statements and accompanying notes in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, income and expenses, and related disclosures of contingent assets and
liabilities in the financial statements and accompanying notes. As a result, actual results could differ from these estimates.
Partnerships
and the Funds Investments. All commodity interests held by
the Partnership and the Funds (including derivative
financial instruments and derivative commodity instruments) are held for trading purposes. The
commodity interests are recorded on trade date and open contracts are recorded at fair value (as
described below) at the measurement date. Investments in commodity interests denominated in foreign
currencies are translated into U.S. dollars at the exchange rates prevailing at the measurement
date. Gains or losses are realized when contracts are liquidated. Unrealized gains or losses on
open contracts are included as a component of equity in trading account on the Statements of
Financial Condition. Net realized gains or losses and any change in net unrealized gains or losses from
the preceding period are reported in the Statements of Income and Expenses and Changes in Partners
Capital.
Partnerships and the Funds Fair Value Measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date under current
market conditions. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to fair values derived from
unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value
measurement in its entirety falls shall be determined based on the lowest level input that is significant to
the fair value measurement in its entirety. Management has concluded that based on available information
in the marketplace, the Partnerships and the Funds Level 1 assets and liabilities are actively traded.
GAAP also requires the need to use judgment in determining
if a formerly active market has become inactive and in determining fair values when the market has become inactive. Management has
concluded that based on available information in the marketplace, there has not been a significant decrease in the volume and level
of activity in the Partnerships and the Funds Level 2 assets and liabilities.
The Partnership and the Funds will separately present purchases, sales, issuances, and settlements
in its reconciliation of Level 3 fair value measurements (i.e., to present such items on a gross basis rather
than on a net basis), and make disclosures regarding the level of disaggregation and the inputs and
valuation techniques used to measure fair value for measurements that fall within either Level 2 or Level 3
of the fair value hierarchy as required under GAAP.
The
Partnership and the Funds consider prices for exchange-traded commodity futures, forwards
and options contracts to be based on unadjusted quoted prices in active markets for identical
assets (Level 1). The values of non exchange-traded forwards, swaps and certain options contracts
for which market quotations are not readily available are priced by broker-dealers who derive fair
values for those assets from observable inputs (Level 2). Investments
in funds (other
commodity pools) where there are no other rights or obligations inherent within the ownership
interest held by the Partnership are priced based on the end of the day net asset value (Level 2).
The value of the Partnerships investments in the Funds reflects its proportional interest in
the Funds. As of and for the periods ended March 31, 2011 and
December 31, 2010, the
Partnership and the Funds did not hold any derivative instruments that are priced at fair value
using unobservable inputs through the application of managements assumptions and internal
valuation pricing models (Level 3).
Futures
Contracts. The Partnership and the Funds trade futures contracts
and exchange-cleared swaps. Exchange-cleared swaps are swaps that are traded as futures. A
futures contract is a firm commitment to buy or sell a specified quantity of investments, currency
or a standardized amount of a deliverable grade commodity, at a specified price on a specified
future date, unless the contract is closed before the delivery date or if the delivery quantity is
something where physical delivery cannot occur (such as the S&P 500 Index), whereby such contract
is settled in cash. Payments (variation margin) may be made or received by the Partnership and
the Funds each business day, depending on the daily fluctuations in the value of the underlying
contracts, and are recorded as unrealized gains or losses by the Partnership and the Funds. When
the contract is closed, the Partnership and the Funds
record a realized gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed. Transactions in futures
contracts require participants to make both initial margin deposits of cash or other assets and
variation margin deposits, through the futures broker, directly with the exchange on which the
contracts are traded. Net realized gains (losses) and changes
in net unrealized
gains (losses) on futures contracts are included in the Statements of Income and Expenses and
Changes in Partners Capital.
17
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Forward Foreign Currency Contracts. Foreign currency contracts are those contracts where
the Funds agree to receive or deliver a fixed quantity of foreign currency for an
agreed-upon price on an agreed future date. Foreign currency contracts are valued daily, and the
Funds net equity therein, representing unrealized gain or loss on the contracts as measured
by the difference between the forward foreign exchange rates at the dates of entry into the
contracts and the forward rates at the reporting date, is included in the Statements of Financial
Condition. Realized gains (losses) and changes in unrealized gains (losses) on foreign currency
contracts are recognized in the period in which the contract is closed or the changes occur,
respectively, and are included in the Statements of Income and Expenses and Changes in Partners
Capital.
The Funds do not isolate that portion of the results of operations arising from the effect of
changes in foreign exchange rates on investments from fluctuations from changes in market prices of
investments held. Such fluctuations are included in net gain (loss) on investments in the
Statements of Income and Expenses and Changes in Partners Capital.
London Metals Exchange Forward Contracts. Metal contracts traded on the London Metals Exchange
(LME) represent a firm commitment to buy or sell a specified quantity of aluminum, copper, lead,
nickel, tin or zinc. LME contracts traded by the Funds are cash settled based on prompt dates
published by the LME. Payments (variation margin) may be made or received by the Funds each
business day, depending on the daily fluctuations in the value of the underlying contracts, and are
recorded as unrealized gains or losses by the Funds. A contract is considered offset when all long
positions have been matched with a like number of short positions settling on the same prompt date. When the contract is closed at the prompt date,
the Funds record a realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Transactions in LME
contracts require participants to make both initial margin deposits of cash or other assets and
variation margin deposits, through the broker, directly with the LME.
Net realized gains (losses) and changes in net unrealized gains (losses) on metal contracts are included in
the Statements of Income and Expenses and Changes in Partners Capital.
18
Tactical Diversified Futures Fund L.P.
Notes to Financial Statements
March 31, 2011
(Unaudited)
Notes to Financial Statements
March 31, 2011
(Unaudited)
Options. The Funds
may purchase and write (sell) both exchange listed and OTC
options on commodities or financial instruments. An option is a contract allowing, but not
requiring, its holder to buy (call) or sell (put) a specific or standard commodity or financial
instrument at a specified price during a specified time period. The option premium is the total
price paid or received for the option contract. When the Funds write an option, the premium
received is recorded as a liability in the Statements of Financial Condition and marked to market
daily. When the Funds purchase an option, the premium paid is recorded as an asset in the
Statements of Financial Condition and marked to market daily. Net realized gains (losses) and changes
in net unrealized gains (losses) on options contracts are included in the Statements of Income and
Expenses and Changes in Partners Capital.
Income Taxes. Income taxes have not been provided as each partner is individually liable for
the taxes, if any, on its share of the Partnerships income and expenses.
GAAP provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed in the financial
statements and requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Partnerships financial statements to determine whether the tax positions
are more-likely-than-not to be sustained by the applicable tax authority. Tax positions with
respect to tax at the Partnership level not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The General Partner concluded
that no provision for income tax is required in the Partnerships financial statements.
The Partnership files U.S. federal and various state and local tax returns. No income tax
returns are currently under examination. Generally, the 2007 through 2010 tax years remain
subject to examination by U.S. federal and most state tax authorities. Management does not
believe that there are any uncertain tax positions that require recognition of a tax liability.
Subsequent
Events. Management of the Partnership evaluates events that occur
after the balance sheet date but before financial statements are
filed. Management has assessed the subsequent events through the date
of filing and determined that there were no subsequent events
requiring adjustment of or disclosure in the financial statements.
Net
Income (Loss) per Unit. Net income (loss) per unit is calculated in
accordance with investment company guidance. See Note 2,
Financial Highlights.
19
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
The Partnership does not engage in the sale of goods or services. The Partnerships assets are
its (i) investment in Funds, (ii) equity in its trading account, consisting of cash and cash
equivalents, and net unrealized appreciation on open futures
contracts, and (iii) interest receivable.
Because of the low margin deposits normally required in commodity futures trading, relatively small
price movements may result in substantial losses to the Partnership. While substantial losses could
lead to a material decrease in liquidity, no such illiquidity
occurred during the first quarter of
2011.
The Partnerships capital consists of the capital contributions of the partners as increased
or decreased by gains or losses on trading and by expenses, interest income, redemptions of
Redeemable Units and distributions of profits, if any.
For
the three months ended March 31, 2011, Partnership capital
decreased 1.7% from
$763,167,489 to $749,991,679. This decrease was attributable to the
redemptions of 29,277.5224 Redeemable Units resulting in an outflow
of $34,359,298, which was offset by the subscriptions of 16,984.5394 Redeemable Units totaling
$19,941,239, coupled with the net income from operations of $1,242,249. Future redemptions could impact the amount of funds available for investment in commodity
contract positions in subsequent periods.
Critical Accounting Policies
The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the
reporting period. Management believes that the estimates utilized in preparing the financial statements are reasonable. Actual results
could differ from those estimates. The Partnerships significant
accounting policies are described in detail in Note 7 of the Financial
Statements.
The Partnership records all investments at fair value in its
financial statements, with changes in fair value reported as a component of net realized and change in net unrealized trading gain (loss)
in the Statements of Income and Expenses and Changes in Partners Capital.
20
Results of Operations
During the first quarter of 2011,
the Partnerships net asset value per unit increased
0.2% from $1,165.28 to $1,167.07 as compared to a decrease of 1.9% in the same period of 2010. The
Partnership experienced a net trading gain before brokerage fees and related fees in the first quarter of
2011 of $17,201,519. Gains were primarily attributable to the Partnership/Funds trading in currencies,
energy, livestock, metals and softs and were partially offset by losses in grains, indices and U.S and non-U.S. Interest
rates. The Partnership experienced a net trading gain before brokerage fees and related fees in
the first quarter of 2010 of $399,310. Gains were primarily attributable to the Partnership/Funds trading in
currencies, U.S and non-U.S. interest rates and livestock and were partially offset by losses in energy,
grains, indices, metals and softs.
The most significant gains were achieved within the energy
markets throughout the majority of the quarter from long futures positions in crude oil and its related products as prices rose amid
an escalation in political instability in the Middle East and North Africa, prompting concerns that crude supplies may be disrupted.
Additional gains were recorded in February from short positions in natural gas futures as prices declined on forecasts of
warmer-than-normal weather in U.S. consuming regions that reduced demand for the heating fuel. Within the metals markets,
gains were experienced primarily during February due to long futures positions in gold and silver as prices of gold futures
reached an all-time high and prices of silver futures extended a rally to a 30-year high after mounting unrest in the Middle
East spurred demand for the precious metals as a safe haven. Within the agricultural complex, gains were experienced primarily
during January and February from long positions in cotton futures as cotton prices reached record highs after floods in cotton-producing
areas in Australia, Pakistan, and China diminished supplies, while demand from China, the worlds largest user of the fiber, continued to
rise. Elsewhere, long positions in coffee futures resulted in gains as coffee prices rose to the highest level since 1997 on signs that
global demand may outstrip production. Within the currency markets, gains were experienced primarily in February and March from long
positions in the Australian dollar, euro, and Canadian dollar versus the U.S. dollar as the value of these currencies moved higher
against the U.S. dollar after better-than-expected U.S. economic data and a report that revealed European consumer confidence rose to
the highest level in a year boosted optimism about the global economic recovery and spurred demand for higher-yielding currency assets.
A portion of the Partnerships gains for the quarter was
offset by losses incurred within the global interest rate sector, primarily during February, from short positions in U.S. and European
fixed-income futures as prices increased amid a flight-to-safety spurred by geopolitical concerns in the Middle East and North Africa.
Within the global stock index markets, losses were experienced primarily during March from long positions in European, Pacific Rim, and
U.S. equity index futures as prices moved sharply lower after the disaster in Japan spurred concern about global economic growth.
Commodity futures markets are highly volatile. The potential for broad and rapid price
fluctuations increases the risks involved in commodity trading, but also increases the possibility
of profit. The profitability of the Partnership/Funds depends on the existence of major price
trends and the ability of the Advisors to correctly identify those price trends. Price trends are
influenced by, among other things, changing supply and demand relationships, weather, governmental,
agricultural, commercial and trade programs and policies, national and international political and
economic events and changes in interest rates. To the extent that market trends exist and the
Advisors are able to identify them, the Partnership expects to increase capital through operations.
Interest
income on 80% of the average daily equity maintained in cash in the
Partnerships (or the Partnerships allocable portion of a
Funds) brokerage account was earned
at the monthly average 30-day U.S. Treasury bill yield.
Interest income for the three months ended March 31, 2011
increased by $55,362 as compared to the corresponding
period in 2010. The increase in interest income is primarily due to
higher U.S. Treasury bill rates during the three months ended
March 31, 2011, as compared to the corresponding period in 2010. Interest earned by the Partnership will increase the net asset value of the Partnership. The amount of interest income earned by the Partnership depends on the average daily equity in the Partnerships and the Funds accounts and upon interest rates over which neither the Partnership nor CGM has control.
Brokerage fees are calculated as a percentage of the Partnerships adjusted net asset value on
the last day of each month and are affected by trading performance,
subscriptions and redemptions.
Accordingly, they must be compared in relation to the fluctuations in the monthly net asset values.
Brokerage fees for the three months ended March 31,
2011 decreased
$11,132 as compared to the corresponding period in 2010. The
decrease in brokerage fees is due to a decrease in average net assets
for the three months ended March 31, 2011, as compared to the corresponding period
in 2010.
Management fees are
calculated as a percentage of the Partnerships adjusted net asset value
as of the end of each month and are affected by trading performance,
subscriptions and redemptions.
Management fees for the three months ended March 31, 2011 decreased
$48,019 as compared to the corresponding period in 2010. The
decrease in management fees is due to a
decrease in average net assets for the three months ended March 31,
2011 as compared to the corresponding period in 2010.
Incentive fees are based on the new trading profits generated by each Advisor
at the end of the quarter as defined in the management agreement among the Partnership, the General Partner and each
Advisor. Trading performance for the three
months ended March 31, 2011 resulted in incentive fees of $347,609.
There were no incentive fees earned for the three months ended March
31, 2010. An Advisor will not be paid
incentive fees until such
Advisor recovers any net loss incurred by the Advisor and earns additional new
trading profits for the Partnership.
In allocating the assets of the Partnership among the trading advisors, the General Partner
considers past performance, trading style, volatility of markets traded and fee requirements. The
General Partner may modify or terminate the allocation of assets among the trading advisors and may
allocate assets to additional advisors at any time.
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The
Partnership/Funds are speculative commodity pools. The market sensitive instruments held
by them are acquired for speculative trading purposes, and all or substantially all of the
Partnerships/Funds assets are subject to the risk of trading loss. Unlike an operating company,
the risk of market sensitive instruments is integral, not incidental,
to the Partnerships main
line of business.
The risk to the limited partners that have purchased interests in the Partnership is limited
to the amount of their capital contributions to the Partnership and their share of the
Partnerships assets and undistributed profits. This limited liability is a consequence of the
organization of the Partnership as a limited partnership under applicable law.
Market movements result in frequent
changes in the fair value of the Partnerships/Funds open
positions and, consequently, in their earnings and cash balances. The Partnerships/Funds market risk is
influenced by a wide variety of factors, including the level and volatility of interest rates,
exchange rates, equity price levels, the market value of financial instruments and contracts, the
diversification effects among the Partnerships/Funds open positions and the liquidity of the markets
in which they trade.
The Partnership/Funds rapidly acquire and liquidate both long and short positions in a wide
range of different markets. Consequently, it is not possible to predict how a particular future
market scenario will affect performance, and the Partnerships/Funds past performance is not
necessarily indicative of their future results.
Value at Risk is a measure of the maximum amount which the Partnership/Funds could reasonably
be expected to lose in a given market sector. However, the inherent uncertainty of the
Partnerships/Funds speculative trading and the recurrence in the markets traded by the
Partnership/Funds of market movements far exceeding expectations could result in actual trading or
non-trading losses far beyond the indicated Value at Risk or the Partnerships/Funds experience to
date (i.e., risk of ruin). In light of the foregoing as well as the risks and uncertainties
intrinsic to all future projections, the inclusion of the quantification in this section should not
be considered to constitute any assurance or representation that the Partnerships/Funds losses in
any market sector will be limited to Value at Risk or by the Partnerships/Funds attempts to
manage their market risk.
Exchange maintenance margin requirements have been used by the Partnership/Funds as the
measure of their Value at Risk. Maintenance margin requirements are set by exchanges to equal or
exceed the maximum losses reasonably expected to be incurred in the fair value of any given
contract in 95%-99% of any one-day interval. Maintenance margin has been used rather than the more
generally available initial margin, because initial margin includes a credit risk component, which
is not relevant to Value at Risk.
Value at Risk tables represent a probabilistic assessment of the risk of loss in market risk
sensitive instruments. With the exception of JWH, the Partnerships advisors currently trade the
Partnerships assets indirectly in master fund managed accounts over which they have been granted
limited authority to make trading decisions. JWH directly trades a managed account in the
Partnerships name. The first two trading Value at Risk tables reflects the market sensitive instruments
held by the Partnership directly and through its investment in the Funds. The remaining trading
Value at Risk tables reflect the market sensitive instruments held by the Partnership directly
(i.e., in the managed account in the Partnerships name traded by JWH) and indirectly by each Fund
separately.
The following tables indicate the trading Value at Risk associated with the Partnerships open
positions by market category as of March 31, 2011 and December 31, 2010. As of
March 31, 2011, the Partnerships total
capitalization was $749,991,679.
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 26,002,531 | 3.48 | % | ||||
Energy |
15,901,302 | 2.12 | % | |||||
Grains |
1,790,362 | 0.24 | % | |||||
Indices |
13,083,925 | 1.74 | % | |||||
Interest Rates U.S. |
3,491,443 | 0.47 | % | |||||
Interest Rates Non-U.S. |
6,556,412 | 0.87 | % | |||||
Livestock |
1,002,429 | 0.13 | % | |||||
Lumber |
1,095 | 0.00 | % | |||||
Metals |
8,231,955 | 1.10 | % | |||||
Softs |
2,879,241 | 0.38 | % | |||||
Total |
$ | 78,940,695 | 10.53 | % | ||||
As of December 31, 2010, the
Partnerships total capitalization was $763,167,489.
December 31, 2010 | ||||||||
% of Total | ||||||||
Market Sector | Value at Risk | Capitalization | ||||||
Currencies |
$ | 17,027,277 | 2.23 | % | ||||
Energy |
18,382,741 | 2.41 | % | |||||
Grains |
3,360,398 | 0.44 | % | |||||
Indices |
13,933,328 | 1.83 | % | |||||
Interest Rates U.S. |
8,649,152 | 1.13 | % | |||||
Interest Rates Non-U.S. |
7,377,323 | 0.97 | % | |||||
Livestock |
1,844,941 | 0.24 | % | |||||
Metals |
6,948,426 | 0.91 | % | |||||
Softs |
3,734,248 | 0.49 | % | |||||
Total |
$ | 81,257,834 | 10.65 | % | ||||
22
The following tables indicate the trading Value at Risk associated with the Partnerships
direct investments and indirect investments in the Funds by market category as of March 31, 2011 and December 31, 2010,
the highest and lowest value at any point and the average value
during the three months ended March 31, 2011 and for the twelve
months ended December 31, 2010. All open position
trading risk exposures have been included in calculating the figures set forth below. There have
been no material changes in the trading Value at Risk information previously disclosed in the
Partnerships Annual Report on Form 10-K for the year ended
December 31, 2010. As of March 31, 2011,
the Partnerships Value at Risk for the portion of its assets that are traded directly by JWH was
as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 320,200 | 0.04 | % | $ | 925,600 | $ | 201,600 | $ | 515,800 | ||||||||||
Energy |
661,248 | 0.09 | % | 661,248 | 494,420 | 606,989 | ||||||||||||||
Grains |
258,750 | 0.04 | % | 736,000 | 120,750 | 379,583 | ||||||||||||||
Indices |
299,467 | 0.04 | % | 314,626 | 34,911 | 208,030 | ||||||||||||||
Interest Rates U.S. |
133,900 | 0.02 | % | 274,289 | 133,900 | 223,828 | ||||||||||||||
Interest Rates Non -U.S. |
330,651 | 0.04 | % | 770,314 | 330,651 | 560,091 | ||||||||||||||
Metals |
842,892 | 0.11 | % | 842,892 | 120,024 | 556,995 | ||||||||||||||
Softs |
823,700 | 0.11 | % | 1,206,240 | 616,000 | 841,753 | ||||||||||||||
Total |
$ | 3,670,808 | 0.49 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, the Partnerships Value at Risk for the portion of its assets
that are traded directly by JWH was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 700,600 | 0.09 | % | $ | 1,005,600 | $ | 28,800 | $ | 596,618 | ||||||||||
Energy |
494,420 | 0.06 | % | 600,500 | 36,500 | 431,918 | ||||||||||||||
Grains |
587,000 | 0.08 | % | 664,000 | 13,875 | 342,870 | ||||||||||||||
Indices |
133,361 | 0.02 | % | 204,731 | 48,781 | 123,711 | ||||||||||||||
Interest Rates U.S. |
361,250 | 0.05 | % | 411,200 | 40,000 | 276,068 | ||||||||||||||
Interest Rates Non -U.S. |
575,201 | 0.07 | % | 615,037 | 102,218 | 425,813 | ||||||||||||||
Metals |
822,000 | 0.11 | % | 822,000 | 39,984 | 475,734 | ||||||||||||||
Softs |
1,121,800 | 0.15 | % | 1,121,800 | 176,000 | 507,714 | ||||||||||||||
Total |
$ | 4,795,632 | 0.63 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
23
As of
March 31, 2011, Drury Masters total capitalization was
$141,616,330. The
Partnership owned approximately 89.0% of Drury Master. As of March
31, 2011, Drury Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to Drury for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average * | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | |||||||||||||||
Currencies |
$ | 9,925,544 | 7.01 | % | $ | 10,623,092 | $ | 4,725,187 | $ | 7,714,268 | ||||||||||
Energy |
1,123,572 | 0.79 | % | 1,778,215 | 1,062,672 | 1,374,502 | ||||||||||||||
Grains |
285,305 | 0.20 | % | 1,244,625 | 285,305 | 861,268 | ||||||||||||||
Indices |
5,109,434 | 3.61 | % | 8,198,762 | 5,029,259 | 6,892,088 | ||||||||||||||
Interest Rates U.S. |
1,391,700 | 0.98 | % | 1,391,700 | 475,908 | 874,853 | ||||||||||||||
Interest Rates Non-U.S. |
741,150 | 0.52 | % | 1,627,325 | 736,667 | 1,232,830 | ||||||||||||||
Metals |
4,686,186 | 3.31 | % | 4,984,103 | 3,921,795 | 4,599,854 | ||||||||||||||
Softs |
619,034 | 0.44 | % | 2,176,397 | 619,034 | 1,440,289 | ||||||||||||||
Total |
$ | 23,881,925 | 16.86 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, Drury Masters total capitalization was $123,074,679. The Partnership owned approximately 87.5% of Drury
Master. As of December 31, 2010, Drury Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Drury for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average * | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | |||||||||||||||
Currencies |
$ | 5,021,338 | 4.08 | % | $ | 5,021,338 | $ | 1,706,188 | $ | 4,123,793 | ||||||||||
Energy |
1,328,630 | 1.08 | % | 1,790,100 | 543,799 | 1,050,228 | ||||||||||||||
Grains |
982,250 | 0.80 | % | 1,650,750 | 165,550 | 982,525 | ||||||||||||||
Indices |
7,109,978 | 5.78 | % | 9,597,332 | 1,667,730 | 5,958,055 | ||||||||||||||
Interest Rates U.S. |
458,036 | 0.37 | % | 1,358,000 | 457,621 | 933,366 | ||||||||||||||
Interest Rates Non-U.S. |
3,594,971 | 2.92 | % | 5,511,448 | 1,657,132 | 3,464,645 | ||||||||||||||
Metals |
3,849,377 | 3.13 | % | 3,849,377 | 502,003 | 1,958,430 | ||||||||||||||
Softs |
1,071,845 | 0.87 | % | 1,393,499 | 278,418 | 939,629 | ||||||||||||||
Total |
$ | 23,416,425 | 19.03 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
24
As
of March 31, 2011, Willowbridge Masters total capitalization was
$168,614,835. The
Partnership owned approximately 18.6% of Willowbridge Master.
As of March 31, 2011, Willowbridge Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to Willowbridge for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 3,114,825 | 1.85 | % | $ | 3,114,825 | $ | 657,720 | $ | 1,874,919 | ||||||||||
Energy |
3,518,500 | 2.09 | % | 3,518,500 | 1,464,750 | 2,468,833 | ||||||||||||||
Grains |
681,000 | 0.40 | % | 2,109,250 | 226,500 | 1,002,500 | ||||||||||||||
Interest Rates U.S. |
415,250 | 0.25 | % | 1,011,711 | 302,400 | 361,238 | ||||||||||||||
Interest Rates Non-U.S. |
1,685,948 | 1.00 | % | 2,134,289 | 1,229,606 | 1,489,274 | ||||||||||||||
Metals |
3,110,127 | 1.84 | % | 3,587,000 | 1,760,207 | 2,736,952 | ||||||||||||||
Softs |
2,629,700 | 1.56 | % | 2,629,700 | 850,500 | 2,240,400 | ||||||||||||||
Total |
$ | 15,155,350 | 8.99 | % | ||||||||||||||||
* | Average of month-end Values at Risk |
As of December 31, 2010, Willowbridge Masters total capitalization was $216,298,633. The Partnership owned approximately 21.2% of Willowbridge
Master. As of December 31, 2010, Willowbridge Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Willowbridge for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 2,232,591 | 1.03 | % | $ | 7,096,121 | $ | 940,854 | 3,547,819 | |||||||||||
Energy |
2,742,900 | 1.27 | % | 6,539,400 | 460,750 | 2,570,821 | ||||||||||||||
Grains |
2,062,750 | 0.95 | % | 3,762,750 | 207,200 | 1,238,276 | ||||||||||||||
Interest Rates U.S. |
774,255 | 0.36 | % | 3,269,700 | 243,600 | 1,143,161 | ||||||||||||||
Interest Rates Non-U.S. |
1,908,692 | 0.88 | % | 5,489,653 | 289,858 | 2,700,503 | ||||||||||||||
Livestock |
112,000 | 0.05 | % | 171,200 | 44,800 | 92,018 | ||||||||||||||
Metals |
3,791,000 | 1.75 | % | 5,643,396 | 710,500 | 2,729,785 | ||||||||||||||
Softs |
2,024,400 | 0.94 | % | 3,388,150 | 198,000 | 1,542,246 | ||||||||||||||
Total |
$ | 15,648,588 | 7.23 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
25
As of March 31, 2011, Aspect Masters total capitalization
was $171,857.926.
The Partnership owned approximately 73.0% of Aspect Master.
As of March 31, 2011, Aspect Masters Value at Risk for its assets (including the portion of the Partnerships assets allocated to Aspect for trading) was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 6,848,407 | 3.99 | % | $ | 8,424,651 | $ | 6,132,034 | $ | 7,404,837 | ||||||||||
Energy |
2,054,170 | 1.20 | % | 2,054,170 | 1,241,868 | 1,577,567 | ||||||||||||||
Grains |
379,656 | 0.22 | % | 736,876 | 342,613 | 543,431 | ||||||||||||||
Indices |
1,979,457 | 1.15 | % | 3,093,179 | 1,263,661 | 2,599,483 | ||||||||||||||
Interest Rates U.S. |
586,200 | 0.34 | % | 586,200 | 172,125 | 370,718 | ||||||||||||||
Interest Rates Non-U.S. |
2,531,705 | 1.47 | % | 2,531,705 | 1,273,466 | 2,101,082 | ||||||||||||||
Livestock |
118,500 | 0.07 | % | 128,500 | 76,750 | 119,217 | ||||||||||||||
Lumber |
1,500 | 0.00 | %** | 3,000 | 1,300 | 1,933 | ||||||||||||||
Metals |
1,432,783 | 0.83 | % | 1,857,539 | 1,115,572 | 1,299,324 | ||||||||||||||
Softs |
646,569 | 0.38 | % | 891,860 | 628,212 | 699,379 | ||||||||||||||
Total |
$ | 16,578,947 | 9.65 | % | ||||||||||||||||
* | Average of month-end Values at Risk | |
** | Due to rounding |
As of December 31, 2010, Aspect Masters total capitalization was $157,864,059. The
Partnership owned approximately 68.7% of Aspect
Master. As of December 31, 2010, Aspect Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Aspect for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | |||||||||||||||||||||
% of Total | High | Low | Average * | ||||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk | ||||||||||||||||
Currencies |
$ | 6,641,142 | 4.21 | % | $ | 6,908,626 | $ | 1,960,264 | $ | 4,676,665 | |||||||||||
Energy |
1,421,450 | 0.90 | % | 1,932,150 | 351,414 | 1,223,668 | |||||||||||||||
Grains |
663,172 | 0.42 | % | 853,702 | 150,472 | 496,932 | |||||||||||||||
Indices |
2,735,405 | 1.73 | % | 15,325,500 | 832,920 | 2,830,563 | |||||||||||||||
Interest Rates U.S. |
128,755 | 0.08 | % | 2,333,350 | 128,755 | 1,185,599 | |||||||||||||||
Interest Rates Non-U.S. |
1,433,026 | 0.91 | % | 6,063,200 | 1,068,897 | 4,111,787 | |||||||||||||||
Livestock |
109,519 | 0.07 | % | 240,000 | 14,717 | 93,906 | |||||||||||||||
Metals |
1,798,174 | 1.14 | % | 2,724,717 | 539,569 | 1,434,801 | |||||||||||||||
Softs |
853,509 | 0.54 | % | 1,719,693 | 494,690 | 987,242 | |||||||||||||||
Total |
$ | 15,784,152 | 10.00 | % | |||||||||||||||||
* | Annual average of month-end Value at Risk |
26
As of
March 31, 2011, CFM Masters total capitalization was
$163,363,291. The Partnership owned approximately 77.2% of CFM
Master. As of March 31, 2011, CFM Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to CFM for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 4,516,820 | 2.76 | % | $ | 6,421,110 | $ | 903,435 | $ | 4,240,119 | ||||||||||
Energy |
909,315 | 0.56 | % | 1,159,537 | 119,162 | 438,448 | ||||||||||||||
Grains |
327,426 | 0.20 | % | 327,426 | 102,213 | 209,965 | ||||||||||||||
Indices |
3,548,263 | 2.17 | % | 8,029,319 | 525,489 | 4,831,495 | ||||||||||||||
Interest Rates U.S. |
1,315,600 | 0.80 | % | 3,412,400 | 431,546 | 2,374,900 | ||||||||||||||
Interest Rates Non
-U.S. |
1,403,095 | 0.86 | % | 3,210,464 | 1,403,095 | 2,433,472 | ||||||||||||||
Livestock |
35,800 | 0.02 | % | 35,800 | 14,900 | 28,067 | ||||||||||||||
Metals |
1,322,225 | 0.81 | % | 1,746,955 | 181,250 | 947,846 | ||||||||||||||
Softs |
220,639 | 0.14 | % | 378,757 | 122,253 | 203,696 | ||||||||||||||
Total |
$ | 13,599,183 | 8.32 | % | ||||||||||||||||
* | Average of month-end Values at Risk | |
As of December 31, 2010, CFM Masters total capitalization was $163,073,234. The Partnership owned approximately 76.3% of CFM
Master. As of December 31, 2010, CFM Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to CFM for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 2,320,930 | 1.42 | % | $ | 6,402,680 | $ | 414,348 | $ | 2,078,665 | ||||||||||
Energy |
344,275 | 0.21 | % | 2,166,109 | 154,579 | 709,954 | ||||||||||||||
Grains |
238,210 | 0.15 | % | 585,400 | 91,736 | 276,553 | ||||||||||||||
Indices |
9,619,057 | 5.90 | % | 9,619,057 | 1,002,179 | 5,981,337 | ||||||||||||||
Interest Rates U.S. |
1,334,500 | 0.82 | % | 3,845,150 | 93,777 | 2,207,437 | ||||||||||||||
Interest Rates Non -U.S. |
1,128,977 | 0.69 | % | 6,320,972 | 315,476 | 2,646,684 | ||||||||||||||
Livestock |
13,404 | 0.01 | % | 129,150 | 2,626 | 30,932 | ||||||||||||||
Metals |
396,250 | 0.24 | % | 814,850 | 13,102 | 336,186 | ||||||||||||||
Softs |
193,451 | 0.12 | % | 587,384 | 124,374 | 253,108 | ||||||||||||||
Total |
$ | 15,589,054 | 9.56 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk |
27
As of March 31, 2011, Winton Masters total
capitalization was $938,086,423. The Partnership owned approximately
11.0% of Winton Master.
As of March 31, 2011, Winton Masters Value at Risk for its assets (including the
portion of the Partnerships assets allocated to Winton for trading)
was as follows:
March 31,
2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 9,794,825 | 1.04 | % | $ | 15,140,134 | $ | 8,078,809 | $ | 10,435,543 | ||||||||||
Energy |
4,245,784 | 0.45 | % | 4,245,784 | 2,892,420 | 3,605,810 | ||||||||||||||
Grains |
2,874,571 | 0.31 | % | 4,371,245 | 2,837,661 | 3,353,776 | ||||||||||||||
Indices |
13,132,023 | 1.40 | % | 17,629,694 | 12,196,809 | 15,223,697 | ||||||||||||||
Interest Rates U.S. |
635,935 | 0.07 | % | 1,592,375 | 635,935 | 1,052,308 | ||||||||||||||
Interest Rates
Non-U.S. |
4,987,691 | 0.53 | % | 6,560,642 | 3,725,576 | 6,008,676 | ||||||||||||||
Livestock |
44,375 | 0.00 | %** | 274,700 | 44,375 | 162,775 | ||||||||||||||
Metals |
6,804,273 | 0.73 | % | 7,869,347 | 6,413,729 | 7,090,013 | ||||||||||||||
Softs |
1,220,236 | 0.13 | % | 1,476,652 | 463,289 | 916,355 | ||||||||||||||
Total |
$ | 43,739,713 | 4.66 | % | ||||||||||||||||
* | Average of month-end Values at Risk. | |
** | Due to rounding. |
As of December 31, 2010, Winton Masters total capitalization was $883,719,871. The Partnership owned approximately 14.0% of Winton
Master. As of December 31, 2010, Winton Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Winton for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 8,969,665 | 1.01 | % | $ | 13,529,797 | $ | 3,127,432 | $ | 9,858,603 | ||||||||||
Energy |
3,277,769 | 0.37 | % | 4,944,082 | 236,988 | 2,213,508 | ||||||||||||||
Grains |
3,992,796 | 0.45 | % | 4,064,389 | 556,164 | 2,285,359 | ||||||||||||||
Indices |
15,987,691 | 1.81 | % | 22,020,780 | 2,382,812 | 12,021,182 | ||||||||||||||
Interest Rates U.S. |
1,387,025 | 0.16 | % | 10,348,050 | 275,672 | 5,195,958 | ||||||||||||||
Interest Rates Non-U.S. |
3,521,207 | 0.40 | % | 13,490,861 | 1,949,046 | 7,347,287 | ||||||||||||||
Livestock |
268,200 | 0.03 | % | 437,350 | 158,080 | 263,226 | ||||||||||||||
Metals |
6,416,979 | 0.73 | % | 8,963,451 | 3,939,668 | 5,989,765 | ||||||||||||||
Softs |
1,393,632 | 0.16 | % | 2,071,953 | 538,916 | 1,029,710 | ||||||||||||||
Total |
$ | 45,214,964 | 5.12 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk. |
28
As
of March 31, 2011, Graham Masters total capitalization was
$158,206,830. The Partnership
owned approximately 63.7% of Graham Master.
As of March 31, 2011, Graham Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to Graham for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 10,526,667 | 6.65 | % | $ | 14,645,028 | $ | 5,042,022 | $ | 9,712,741 | ||||||||||
Energy |
1,121,320 | 0.71 | % | 1,221,130 | 430,473 | 715,112 | ||||||||||||||
Grains |
478,650 | 0.30 | % | 624,700 | 436,750 | 497,655 | ||||||||||||||
Indices |
4,094,626 | 2.59 | % | 11,180,261 | 3,276,704 | 6,785,775 | ||||||||||||||
Interest Rates U.S. |
829,155 | 0.52 | % | 1,205,145 | 545,675 | 851,529 | ||||||||||||||
Interest Rates Non-U.S. |
2,782,686 | 1.76 | % | 3,022,899 | 1,439,332 | 2,717,692 | ||||||||||||||
Livestock |
63,600 | 0.04 | % | 63,600 | 38,000 | 42,867 | ||||||||||||||
Metals |
1,048,048 | 0.66 | % | 1,637,443 | 616,825 | 1,030,163 | ||||||||||||||
Softs |
375,073 | 0.24 | % | 491,327 | 241,774 | 354,051 | ||||||||||||||
Total |
$ | 21,319,825 | 13.47 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As
of December 31, 2010, Graham Masters total capitalization was $168,924,671. The Partnership owned approximately 62.5% of Graham
Master. As of December 31, 2010, Graham Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Graham for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Currencies |
$ | 6,192,975 | 3.67 | % | $ | 11,364,239 | $ | 996,231 | $ | 5,226,199 | ||||||||||
Energy |
1,048,521 | 0.62 | % | 1,989,347 | 236,269 | 1,000,222 | ||||||||||||||
Grains |
448,450 | 0.26 | % | 964,687 | 124,875 | 411,118 | ||||||||||||||
Indices |
5,301,813 | 3.14 | % | 13,726,706 | 1,137,775 | 5,507,221 | ||||||||||||||
Interest Rates U.S. |
161,600 | 0.10 | % | 2,021,410 | 68,806 | 1,014,515 | ||||||||||||||
Interest Rates Non-U.S. |
1,209,918 | 0.72 | % | 4,305,447 | 749,055 | 2,006,426 | ||||||||||||||
Livestock |
40,000 | 0.02 | % | 106,400 | 800 | 50,304 | ||||||||||||||
Metals |
1,012,127 | 0.60 | % | 1,771,142 | 494,357 | 993,963 | ||||||||||||||
Softs |
258,565 | 0.15 | % | 1,144,148 | 85,988 | 385,351 | ||||||||||||||
Total |
$ | 15,673,969 | 9.28 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk. |
29
As
of March 31, 2011, SandRidge Masters total capitalization was
$378,195,781. The Partnership owned approximately 10.3% of SandRidge Master.
As of March 31, 2011, SandRidge Masters Value at Risk for its assets
(including the portion of the Partnerships assets allocated to SandRidge for trading) was as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 34,995,837 | 9.25 | % | $ | 61,733,650 | $ | 31,352,944 | $ | 41,648,911 | ||||||||||
Total |
$ | 34,995,837 | 9.25 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As of December 31, 2010, SandRidge Masters total capitalization was $528,735,257. The Partnership owned approximately 13.8% of SandRidge
Master. As of December 31, 2010, SandRidge Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to SandRidge for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 61,391,255 | 11.61 | % | $ | 85,692,107 | $ | 18,754,664 | $ | 56,852,448 | ||||||||||
Total |
$ | 61,391,255 | 11.61 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk. |
As of March 31, 2011, Sasco Masters total capitalization was $102,109,165 . The Partnership
owned approximately 73.0% of Sasco Master. As of March 31, 2011, Sasco Masters Value at Risk for
its assets (including the portion of the partnerships assets allocated to Sasco for trading) was
as follows:
March 31, 2011
Three Months Ended March 31, 2011 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 9,038,644 | 8.85 | % | $ | 23,105,575 | $ | 9,038,644 | $ | 17,056,663 | ||||||||||
Totals |
$ | 9,038,644 | 8.85 | % | ||||||||||||||||
* | Average of month-end Values at Risk. |
As of December 31, 2010, Sasco Masters total capitalization was $81,683,630. The Partnership owned approximately 55.3% of Sasco
Master. As of December 31, 2010, Sasco Masters Value at Risk for its assets (including the portion of the Partnerships assets
allocated to Sasco for trading) was as follows:
December 31, 2010
Twelve Months Ended December 31, 2010 | ||||||||||||||||||||
% of Total | High | Low | Average | |||||||||||||||||
Market Sector | Value at Risk | Capitalization | Value at Risk | Value at Risk | Value at Risk* | |||||||||||||||
Energy |
$ | 9,618,175 | 11.77 | % | $ | 16,002,038 | $ | 2,149,045 | $ | 10,344,808 | ||||||||||
Totals |
$ | 9,618,175 | 11.77 | % | ||||||||||||||||
* | Annual average of month-end Value at Risk. |
30
Item 4. Controls and Procedures.
The Partnerships disclosure controls and procedures are designed to ensure that information
required to be disclosed by the Partnership on the reports that it files or submits under the
Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and
reported within the time periods expected in the SECs rules and forms. Disclosure controls
and procedures include controls and procedures designed to ensure that information required to be
disclosed by the Partnership in the reports it files is accumulated and communicated to management,
including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the General
Partner, to allow for timely decisions regarding required disclosure and appropriate SEC filings.
Management is responsible for ensuring that there is an adequate and effective process for
establishing, maintaining and evaluating disclosure controls and procedures for the Partnerships
external disclosures.
The General Partners CEO and CFO have evaluated the effectiveness of the Partnerships
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of March 31, 2011 and, based on that evaluation, the General Partners CEO and CFO have concluded that at
that date the Partnerships disclosure controls and procedures were effective.
The Partnerships internal control over financial reporting is a process under the supervision
of the General Partners CEO and CFO to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with GAAP. These
controls include policies and procedures that:
| pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; | ||
| provide reasonable assurance that (i) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and (ii) the Partnerships receipts are handled and expenditures are made only pursuant to authorizations of the General Partner; and | ||
| provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnerships assets that could have a material effect on the financial statements. |
There were no changes in the Partnerships internal control over financial reporting process
during the fiscal quarter ended March 31, 2011 that materially affected, or are reasonably
likely to materially affect, the Partnerships internal control over financial reporting.
31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
This section describes the major pending legal
proceedings, other than ordinary routine litigation incidental to the business, to which CGM is a party or to which any of
their property is subject. There are no material legal proceedings pending against the Partnership or the General Partner.
CGM is a New York corporation with its principal
place of business at 388 Greenwich St., New York, New York 10013. CGM is registered as a broker-dealer and futures commission
merchant (FCM), and provides futures brokerage and clearing services for institutional and retail participants in the futures
markets. CGM and its affiliates also provide investment banking and other financial services for clients worldwide.
There have been no material administrative, civil or
criminal actions within the past five years against CGM (formerly known as Salomon Smith Barney) or any of its individual principals
and no such actions are currently pending, except as follows.
Mutual Funds
Several issues in the mutual fund industry have come
under the scrutiny of federal and state regulators. Citigroup has received subpoenas and other requests for information from various
government regulators regarding market timing, financing, fees, sales practices and other mutual fund issues in connection with various
investigations. Citigroup is cooperating with all such reviews. Additionally, CGM has entered into a settlement agreement with the SEC
with respect to revenue sharing and sales of classes of funds.
On May 31, 2005, Citigroup announced that Smith Barney
Fund Management LLC and CGM completed a settlement with the SEC resolving an investigation by the SEC into matters relating to
arrangements between certain Smith Barney mutual funds, an affiliated transfer agent and an unaffiliated sub-transfer agent. Under
the terms of the settlement, Citigroup agreed to pay fines totaling $208.1 million. The settlement, in which Citigroup neither
admitted nor denied any wrongdoing or liability, includes allegations of willful misconduct by Smith Barney Fund Management LLC
and CGM in failing to disclose aspects of the transfer agent arrangements to certain mutual fund investors.
In May 2007, CGM finalized its settlement agreement with the NYSE and the New Jersey Bureau of Securities on the matter related to its market-timing practices prior to September 2003.
FINRA Settlement
On October 12, 2009, FINRA announced its acceptance of an
Award Waiver and Consent (AWC) in which CGM, without admitting or denying the findings, consented to the entry of the AWC and a fine
and censure of $600,000. The AWC includes findings that CGM failed to adequately supervise the activities of its equities trading desk
in connection with swap and related hedge trades in U.S. and Italian equities that were designed to provide certain perceived tax
advantages. CGM was charged with failing to provide for effective
written procedures with respect to the implementation of the trades, failing to monitor Bloomberg messages and failing to
properly report certain of the trades to the NASDAQ.
Auction Rate Securities
On May 31, 2006, the SEC instituted and simultaneously
settled proceedings against CGM and 14 other broker-dealers regarding practices in the auction rate securities market. The SEC alleged
that the broker-dealers violated Section 17(a)(2) of the Securities Act of 1933, as amended. The broker-dealers, without admitting or
denying liability, consented to the entry of an SEC cease-and-desist order providing for censures, undertakings and penalties. CGM paid
a penalty of $1.5 million.
On August 7, 2008, Citigroup reached a settlement with the
New York Attorney General, the SEC, and other state regulatory agencies, pursuant to which Citigroup agreed to offer to purchase at par
auction rate securities from all Citigroup individual investors, small institutions (as defined by the terms of the settlement), and
charities that purchased auction rate securities from Citigroup prior to February 11, 2008. In addition, Citigroup agreed to pay a
$50 million fine to the State of New York and a $50 million fine to the other state regulatory agencies.
Subprime Mortgage-Related Actions
The SEC, among other regulators, is investigating
Citigroups subprime and other mortgage-related conduct and business activities, as well as other business activities affected by
the credit crisis, including an ongoing inquiry into Citigroups structuring and sale of collateralized debt obligations. Citigroup
is cooperating fully with the SECs inquiries.
On July 29, 2010, the SEC announced the settlement of an
investigation into certain of Citigroups 2007 disclosures concerning its subprime-related business activities. On October 19, 2010,
the United States District Court for the District of Columbia entered a final judgment approving the settlement, pursuant to which
Citigroup agreed to pay a $75 million civil penalty and to maintain certain disclosure policies, practices and procedures for a
three-year period. Additional information relating to this action is publicly available in court filings under the docket
number 10 Civ. 1277 (D.D.C.) (Huvelle, J.).
The Federal Reserve Bank, the OCC and the FDIC, among other
federal and state authorities, are investigating issues related to the conduct of certain mortgage servicing companies, including
Citigroup affiliates, in connection with mortgage foreclosures. Citigroup is cooperating fully with these inquiries.
Credit Crisis Related Matters
Beginning in the fourth quarter of 2007, certain of
Citigroups, and CGM regulators and other state and federal government agencies commenced formal and informal investigations and
inquiries, and issued subpoenas and requested information, concerning Citigroups subprime mortgage-related conduct and business
activities. Citigroup and certain of its affiliates, including CGM, are involved in discussions with certain of its regulators to
resolve certain of these matters.
Certain of these regulatory matters assert claims for
substantial or indeterminate damages. Some of these matters already have been resolved, either through settlements or court
proceedings, including the complete dismissal of certain complaints or the rejection of certain claims following hearings.
In the course of its business, CGM, as a major futures
commission merchant and broker-dealer, is a party to various civil actions, claims and routine regulatory investigations and
proceedings that the general partner believes do not have a material effect on the business of CGM.
32
Item 1A. Risk Factors.
There have been no material changes to the risk factors set forth under Part I, Item 1A. Risk
Factors in the Partnerships Annual Report on Form 10-K
for the fiscal year ended December 31, 2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The public offering of Redeemable Units terminated on November 30, 2008.
For
the three months ended March 31, 2011, there were additional
subscriptions of 16,984.5394 Redeemable Units totaling $19,941,239. The Redeemable Units were issued in reliance upon applicable
exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, and
Section 506 of Regulation D promulgated thereunder. The Redeemable Units were purchased by
accredited investors as described in Regulation D.
Proceeds of net offering were used for the trading of commodity
interests including futures contracts, swaps, options and forward contracts.
The following chart sets forth the purchases of Redeemable Units by the Partnership.
(d) Maximum Number | ||||||||||||||||||||||
(c) Total Number | (or Approximate | |||||||||||||||||||||
of Redeemable Units | Dollar Value) of | |||||||||||||||||||||
Purchased as Part | Redeemable Units that | |||||||||||||||||||||
(a) Total Number | (b) Average | of Publicly | May Yet Be | |||||||||||||||||||
of Redeemable | Price Paid per | Announced | Purchased Under the | |||||||||||||||||||
Period | Units Purchased* | Redeemable Unit** | Plans or Programs | Plans or Programs | ||||||||||||||||||
January 1,
2011 January 31, 2011 |
8,552.7406 | $ | 1,164.53 | N/A | N/A | |||||||||||||||||
February 1,
2011 February 28, 2011 |
7,344.3341 | $ | 1,195.95 | N/A | N/A | |||||||||||||||||
March 1,
2011 March 31, 2011 |
13,380.4477 | $ | 1,167.07 | N/A | N/A | |||||||||||||||||
29,277.5224 | $ | 1,173.57 | ||||||||||||||||||||
* | Generally, limited partners are permitted to redeem their Redeemable Units as of the end of each month on three business days notice to the General Partner. Under certain circumstances, the General Partner can compel redemption, although to date the General Partner has not exercised this right. Purchases of Redeemable Units by the Partnership reflected in the chart above were made in the ordinary course of the Partnerships business in connection with effecting redemptions for limited partners. | |
** | Redemptions of Redeemable Units are effected as of the last day of each month at the net asset value per Redeemable Unit as of that day. |
Item 3. Defaults Upon Senior Securities. None.
Item 4. [Removed
and Reserved]
Item 5. Other Information.
The Partnership fully redeemed its investment in SandRidge Master on April 30, 2011. As of May 1, 2011, a portion of the Partnerships assets was allocated to Altis Partners (Jersey) Limited, which was invested in CMF Altis Partners Master Fund L.P. As of May 1, 2011, a portion of the Partnerships assets was allocated to Krom River Trading AG, which was invested in KR Master Fund L.P.
The Partnership fully redeemed its investment in SandRidge Master on April 30, 2011. As of May 1, 2011, a portion of the Partnerships assets was allocated to Altis Partners (Jersey) Limited, which was invested in CMF Altis Partners Master Fund L.P. As of May 1, 2011, a portion of the Partnerships assets was allocated to Krom River Trading AG, which was invested in KR Master Fund L.P.
33
Item 6. Exhibits
3.1
|
Certificate of Limited Partnership of the Partnership as filed in the office of the Secretary of State of the State of New York (filed as Exhibit 3.2 to the Registration on Form S-1 filed on December 20, 2002 and incorporated herein by reference). | ||
(a)
|
Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated May 21, 2003 (filed as Exhibit 99.2 to the Form 8-K filed on November 3, 2009 and incorporated herein by reference). | ||
(b)
|
Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 21, 2005 (filed as Exhibit 99.3 to the Form 8-K filed on November 3, 2009 and incorporated herein by reference). | ||
(c)
|
Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 19, 2008 (filed as Exhibit 99.4 to the Form 8-K filed on November 3, 2009 and incorporated herein by reference). | ||
(d)
|
Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated September 24, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on September 30, 2009 and incorporated herein by reference). | ||
(e)
|
Certificate of Amendment to the Certificate of Limited Partnership as filed in the office of the Secretary of State of the State of New York, dated June 30, 2010 (filed as Exhibit 3.1(e) to the Form 8-K filed on July 2, 2010 and incorporated herein by reference). | ||
3.2
|
Limited Partnership Agreement (filed as Exhibit A to the Post-Effective Amendment No. 5 to the Registration on Form S-1 filed on April 22, 2008 and incorporated herein by reference). | ||
(a)
|
Amendment to the Limited Partnership Agreement, dated May 31, 2009 (filed as Exhibit 99.1 to the Form 8-K filed on November 3, 2009 and incorporated herein by reference). | ||
10.1
|
Amended and Restated Customer Agreement among the Partnership and Salomon Smith Barney Inc. (filed as Exhibit 10.1 to the Pre-Effective Amendment No. 2 to the Registration on Form S-1 filed on March 18, 2003 and incorporated herein by reference). | ||
10.2
|
Escrow Agreement among the Partnership, Salomon Smith Barney Inc. and JPMorgan Chase Bank (filed as Exhibit 10.3 to the Pre-Effective Amendment No. 1 to the Registration on Form S-1 filed on February 14, 2003). | ||
10.3
|
Management Agreement among the Partnership, the General Partner and Graham (filed as Exhibit 10.5 to the Registration on Form S-1 filed on December 20, 2002). | ||
(a)
|
Letter from the General Partner extending Management Agreement with Graham for 2010 (filed as Exhibit 10.3(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.4
|
Management Agreement among the Partnership, the General Partner and Willowbridge (filed as Exhibit 10.7 to the Registration on Form S-1 filed on December 20, 2002). | ||
(a)
|
Letter from the General Partner extending Management Agreement with Willowbridge for 2010 (filed as Exhibit 10.4(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.5
|
Management Agreement among the Partnership, the General Partner and Drury (filed as Exhibit 10.4 to the Pre-Effective Amendment No. 1 to the Registration on Form S-1 filed on February 14, 2003). | ||
(a)
|
Letter from the General Partner extending Management Agreement with Drury for 2010 (filed as Exhibit 10.5(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.6
|
Management Agreement among the Partnership, the General Partner and JWH (filed as Exhibit 10.6 to the Pre-Effective Amendment No. 2 to the Registration on Form S-1 filed on March 18, 2003). | ||
(a)
|
Letter from the General Partner extending Management Agreement with JWH for 2010 (filed as Exhibit 10.6(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.7
|
Management Agreement among the Partnership, the General Partner and Winton (filed as Exhibit 10.2 to the Form 10-K filed on March 16, 2005 and incorporated herein by reference). | ||
(a)
|
Letter from the General Partner extending Management Agreement with Winton for 2010 (filed as Exhibit 10.7(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.8
|
Amended and Restated Management Agreement among the Partnership, the General Partner and CFM (filed as Exhibit 10.8 to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.9
|
Management Agreement among the Partnership, the General Partner and Aspect (filed as Exhibit 10.4 to the Form 10-K filed on March 16, 2005 and incorporated herein by reference). |
34
(a)
|
Letter from the General Partner extending Management Agreement with Aspect for 2010 (filed as Exhibit 10.9(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.10
|
Management Agreement among the Partnership, the General Partner and SandRidge (filed as Exhibit 10.1 to the Form 10-Q filed on May 15, 2009 and incorporated herein by reference). | ||
(a) |
Letter from the General Partner extending Management Agreement with SandRidge for 2010 (filed as Exhibit 10.11(a) to the Form 10-K filed on March 31, 2011 and incorporated herein by reference). | ||
10.11 |
Management Agreement among the Partnership, the General Partner and Sasco (filed as exhibit 10.13 to the Form 8-K filed on September 27, 2010 and incorporated herein by reference). | ||
10.12 |
Management Agreement among the Partnership, the General Partner and Altis Partners (Jersey) Limited. (filed as Exhibit 10.13 to the Form 8-K filed on May 3, 2011 and incorporated herein by reference). | ||
10.13 |
Management Agreement among the Partnership, the General Partner and Krom River Investment Management (Cayman) Limited and Krom River Trading AG (filed as Exhibit 10.14 to the Form 8-K filed on May 3, 2011 and incorporated herein by reference). | ||
10.14 |
Second Amended and Restated Agency Agreement among the Partnership, the General Partner, CGM and MSSB dated July 29, 2010 (filed as Exhibit 10.12 to the Form 8-K filed on August 3, 2010 and incorporated herein by reference). |
31.1 Rule 13a-14(a)/15d-14(a) Certification (Certification of President and Director)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director)
32.1 Section 1350 Certification (Certification of President and Director)
32.2 Section 1350 Certification (Certification of Chief Financial Officer and Director)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Certification of Chief Financial Officer and Director)
32.1 Section 1350 Certification (Certification of President and Director)
32.2 Section 1350 Certification (Certification of Chief Financial Officer and Director)
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TACTICAL DIVERSIFIED FUTURES FUND L.P.
By:
|
Ceres Managed Futures LLC
|
|||
By:
|
/s/ Walter Davis
|
|||
President and Director | ||||
Date:
|
May 16, 2011
|
|||
By:
|
/s/ Jennifer Magro
|
|||
Chief Financial Officer and Director | ||||
(Principal Accounting Officer) | ||||
Date:
|
May 16, 2011
|
36